Thales called winner of plane contract

EmilyChurch

FARNBOROUGH, England (CBS.MW) -- In a setback for Northrop Grumman, France's Thales is expected to win the lead contractor role to build the Watchkeeper pilotless plane for the British army, people familiar with the matter said Monday.

Aerospace industry sources said the Ministry of Defense may announce the winner of the battlefield-intelligence program, worth an estimated 800 million British pounds ($1.2 billion) as early as Tuesday. It's likely to be one of the biggest defense contracts to be awarded at this week's Farnborough Air Show.

A rival group led by U.S.-based Northrop Grumman
NOC, -0.42%
proposed a system based on a combination of planes. Other contractors in the Northrop group included BAE Systems
BAE,
General Dynamics
GD, +0.29%
and Ultra Electronics (ULE).

A spokesman for Northrop Grumman declined to comment.

Thales (012132) a French defense group, is expected to form a British-based joint venture on the Watchkeeper project with Israel's Elbit. The market for pilotless planes is estimated to be worth $3 billion over the next 10 years.

Elbit, the largest publicly traded Israeli defense contractor, will provide the technology for the plane. The surveillance system subcontractor hasn't been determined.

On Wednesday, British Defense Secretary Geoff Hoon is expected to outline a review on his department's budget.

On the Paris Bourse, Thales' stock closed up 0.2 percent at 28.58 euros.

In New York, shares of Northrop closed up 10 cents at $53.88. U.S.-listed shares of BAE were unchanged at $16.05. General Dynamics rose 90 cents to $97.90.

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